Coach has entered a binding agreement to sell the Reed Krakoff label to a group led by its departing creative director, WWD reports.

Earlier this month, Bloomberg reported Coach had threatened to reduce Krakoff’s annual bonus by $3 million if an agreement on the sale of the Reed Krakoff label was not reached by July 29. Krakoff had run both brands from the same office at Coach’s headquarters on 34th Street in New York City, but the set-up was bound to change following Coach’s April announcement that Krakoff, who served as both president and executive creative director of the leather goods and accessories brand, would let his contract expire in 2014 after working at the company for 16 years. Coach tapped Stuart Vevers as Krakoff’s replacement in June.

The agreement comes at a period of transition and growth for both Krakoff and Coach. After launching in 2010, Krakoff’s eponymous label has received enormous attention in the last year. Last summer, a $990 shirt by Krakoff became a hot topic of conversation on the campaign trail after Ann Romney wore it on a morning television appearance; many critics blasted her for appearing out of touch with average Americans, though Krakoff defended her decision to TIME, saying, “Both [Michelle] Obama and Romney buy designer clothing, and I thought it showed how lopsided these conversations are. They both can and should wear what they want.” Later, First Lady Michelle Obama wore a navy dress of his for her husband’s private swearing-in ceremony during Inauguration weekend in January. She also picked the label again for her second term official portrait as well as her second appearance on the cover of Vogue in April. Outside of the Beltway, Krakoff was named Accessory Designer of the Year at the 2012 Council of Fashion Designers of America Awards.

Meanwhile, Coach is in the midst of transforming itself from a leather and accessories company to a full-on, luxury lifestyle brand, though the success of that revamp is yet to be determined. On top of announcing that it would sell the Reed Krakoff label this week, the company reported fiscal fourth-quarter profit dropped 12 percent as a result of discounts on its shoe collection, which debuted in March, and disappointing handbag sales in North America. But the company has much to look forward to for the remainder of the year: in addition to Vevers’ new energy, the company will launch a collaboration with designer Billy Reid this fall that reflects both Reid’s growing reach as well the more upscale aesthetic—and price point—that Coach has adopted in the last year. One piece from the collection, a tote crafted from Louisiana crocodile, retails for a cool $20,000, though most other pieces such as suede satchels and alligator-wrapped flasks range from $250-$800.